We have written before about the student loan bubble. It is in the early stages of popping. There’s just too much debt, and there are just too few jobs for people coming out of school. Sooner or later those bills aren’t getting paid.
We often assume that this $1 trillion in student debt is held by college graduates, who have a hard enough time finding a job. But many of the people with debt are people who went to school to hide from the economy but never graduated. Now they have a growing pile of debt without a degree. Life must be a blast for these folks.
The universities benefit most from this system. Our higher education complex has been built over the last 30 years on sub-sub-prime loans. Who gives a $100K loan to a 20 year old with no assets? The government and banks backed by the government do.
(From American Banker)
“This situation is simply unsustainable and we’re already suffering the consequences,” Andrew Jennings, chief analytics officer of Fair Issac, said in the statement. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”
Student loans are the largest source of unsecured consumer debt in the U.S., according to the Consumer Financial Protection Bureau, and the rise in unpaid loans has spurred speculation about a possible bubble. With college costs climbing faster than the rate of inflation over the past four decades, education debt has swelled to $1 trillion, more than what Americans owe on their credit cards.